‘User Pays’ Advice System Won’t Work for Corporate Clients – CSSA

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The Corporate Super Specialist Alliance (CSSA) has voiced its opposition to suggestions a ‘user-pays’ advice system should be introduced for members of corporate superannuation and other group schemes who are seeking financial advice.

The organisation, which represents providers of corporate super fund advisory services, believes the current ‘collective fee’ arrangement is one that delivers best value for super fund members needing insurance and investment advice:

“Currently, collective fees are agreed between employers and advisers and apply equally across all members,” said CSSA President, Douglas Latto.

But with opt-in regulations intended for implemenation as part of the Government’s proposed Future of Financial Advice reforms, Mr Latto said CSSA believes that in the future, only individual members will be able to agree to such fees. “What this will mean in practice is that if opt-in is introduced, advisers will have to collect the signatures of hundreds of thousands of employees every two years – an impracticable and we believe ultimately impossible task,” he said.

The way the system works at the moment allows everyone to share the cost so that services can be delivered to all members at all times

Commenting on the alternative suggestion of a user-pays system of delivering advice to super fund members, Mr Latto said “This has been trialled by some segments of the industry and we know from those experiences that it doesn’t work because it is reactive, not proactive.”  He added: “The way the system works at the moment allows everyone to share the cost so that services can be delivered to all members at all times. Members always have the option to opt-out through fund choice.”

Mr Latto also re-stated his opposition to Minister Bill Shorten‘s position where he is reconsidering the Government’s intention to ban risk commissions on individually advised superannuation but that he did not see the case for commissions on insurance through default or group policies:

“Minister Shorten’s statement assumes – wrongly, in our opinion – that group risk is unadvised. In fact, corporate specialists provide a range of ongoing advice services which are available to all members of the corporate super plan at all times.”

Mr Latto detailed examples of these services:

  1. Providing ongoing reviews
  2. Continually monitoring the insurer for accurate data (particularly where sums insured are linked to salary)
  3. Assisting in the underwriting requirements of new members
  4. Answering member questions
  5. Conducting seminars
  6. Being there for members at claim time

Mr Latto warned that if corporate super specialists cannot be fairly rewarded for their services then those services will have to be withdrawn and ordinary Australians will lose access to experienced financial advice professionals.